money owed on former business account

geeka

hello all, im putting this on here for my partner (sorry if its in the wrong place!)
she had a beauty salon via a partnership with her mother (silent partner), the business wasnt viable but they had an overdraft of 10k in the partnership name. she had to close the salon as it was too expensive to run so she is now renting a room. the issue is the 7.5k overdraft outstanding. i would assume she is liable for it even though (as far as the bank is concerned) the business in no longer running. my partner earns very little so it would take 8 years to pay it off and shes stressing. can anyone help or advise. much appreciated.
Tim

Marisco

Hi geeka, I don't know anything about business practices, but someone will be along who does. But would her mum not be equally liable for the overdraft if it was a partnership?

flossieflipflop

Hi,

I don't know muc about business accounts after business has closed, except that if it was a partnership it was likely unlimited liability which does mean the owner(s) are personally responsible for debts of the business and this can include having to use personal assets to pay off these debts. (a limited liability company however are not. They only lose what has been invested).
Therefore I think your partner is almost certainly still liabile for the debts.

In respect to her mother's responsibility, if she was a silent partner I *think* that means the mother has limited liability as she has had no involvement in the running of the business. She would stand to lose any money she has invested but wouldn't be responsible for any outstanding debts.
I'm not 100% sure on my last point though so hopefully someone better qualified will know more on that.
I think this last point will only apply if a legal deed of partnership was set up which outlines the fact the mother is a silent partner.

Flossie

david39

I would have thought that the bank account that carries the overdraft would have been set up in the names of all partners in the business - the bank would have insisted on this to spread their risk.

If this is the case (and you only need to look at the name(s) on the bank account statements to check), then both partners will be equally and severally liable.

This means that the bank will be able to recover the money from either or both of them. If they are unable each to pay an equal share of the outstanding sum, the bank can recover the shortfall of one partner from the other one.

geeka

I had an inkling that was the case, who would it be best to talk to?

DarkConvict

Talk to business debtline, they will give you a straight answer - http://www.bdl.org.uk/

I agree with the others, partnership and sole traders have unlimited liability, basically meaning the owners are personally responsible for the business assets, and this includes the debts.
A company would have to have a LTD (or PLC) status to get limited liability. A LTD means the business exists as its own legal entity, everything is owned by the business.

Whether the business partner is liable for debts depends on if they are an owner or if they are just an investor. Investors aren't liable, only the owners.

geeka

Thanks Dark, ive heard they are good. hopefully she can resolve it.
cheers guys